MACKEY v. LANIER COLLECTION AGENCY & SER
Legal provision: Employee Retirement Income Security
ORAL ARGUMENT BY ERNEST L. MATHEWS, ESQ. ON BEHALF OF PETITIONERS
Chief Justice William H. Rehnquist: Mr. Mathews, you may proceed whenever you are ready.
Mr. Mathews: Mr. Chief Justice, and may it please the Court:
The issue in this case is the extent to which the Employees Retirement Income Security Act of 1974, ERISA, preempts state garnishment laws.
The Petitioner is a longshoreman's vacation and holiday fund which is an employee benefit fund, a welfare fund governed by ERISA.
The case arose when a collection agency in Georgia, the Respondent Lanier Collection Agency, attempted to garnish the vacation and holiday benefits of 23 longshoremen.
They brought a proceeding in the County Court of Chatham County, Georgia.
In the decision under review, the Supreme Court of Georgia held that while the state garnishment procedures were not preempted as applied to ERISA welfare funds, the exception in the Georgia statute, which removed from the effects of garnishment welfare funds, was preempted as being contrary to the provisions of ERISA.
The real issue in this case, it seems to me, is whether Congress means what it says, because we are dealing here with an expressed preempt section, Section 514 of ERISA, which says that any state law that relates to an employee benefit plan is preempted, so there is no need to psychoanalyze Congress or to go into legislative history.
It is right there plain and simple in the statute.
And the words "relate to" have been construed by this Court in a unanimous decision which has been relied on in five different cases with no change from the definition that relate to as the ordinary, common sense dictionary meaning.
If something relates to something, if it has an effect on it, it has reference to it, it has a connection with it.
So really the only question in this case is whether or not when you have an attempt to garnish these funds, does the state garnishment law have an effect upon the funds.
Unidentified Justice: How about state laws against embezzlement?
I mean it just can't possibly mean anything that has an effect upon the fund.
You mean state laws against embezzlement do not apply to embezzlement from the funds?
Mr. Mathews: Well, Congress anticipated your question, Justice Scalia, because ERISA expressly removes from its preemption section state laws of general... criminal laws of general application.
So embezzlement is a--
Unidentified Justice: Civil laws of general application.
Mr. Mathews: --Criminal laws.
Unidentified Justice: What about civil laws of general application?
Mr. Mathews: Congress does not remove that.
Unidentified Justice: So there could be no civil action for embezzlement under state law?
Mr. Mathews: No, there could not.
And I think that's similar to a case that this Court had where the beneficiaries of the fund tried to bring a common law action against the trustees, and this Court held, no, they were limited to the remedies provided in ERISA.
I think there would be a remedy in ERISA if there were embezzlement by the trustees, but it wouldn't be a state common law embezzlement action.
Unidentified Justice: An automobile accident caused by a car driven by an employee of the trust, on the business of the trust, you say there could be no recovery because that would relate to ERISA.
You would say that.
Mr. Mathews: Well, I--
Unidentified Justice: You have to.
Mr. Mathews: --I don't think I have to.
Unidentified Justice: No?
Mr. Mathews: I'm not sure.
I mean that's not our case, but I'm not sure because I think--
Unidentified Justice: Well, I know it's not your case.
Mr. Mathews: --Well, I think that Congress obviously intended that these ERISA plans function.
And if they are going to function in the real world, they are going to have to hire employees, they are going to have to rent premises, you know, rent a xerox machine, what have you.
And nobody is going to work for them if they can't sue them for their wages, and no one is going to rent property or rent space to them if they can't evict them if they don't pay.
So I think Congress must have intended that the ordinary liabilities that someone has entering into any business would apply to the ERISA fund.
Unidentified Justice: So we are just arguing about whether being liable for garnishment is one of the ordinary things that any employer normally engages in.
Mr. Mathews: And if this case were a garnishment about a fund employee, I might even agree that that is not preempted.
Unidentified Justice: I see.
Mr. Mathews: But this is a garnishment of the beneficiaries of the fund.
I mean our fund, for instance, well, it really doesn't have any paid employees.
But if it did, it would have two or three.
Here they have got 3,000 of which 23 in one bunch are being garnished, and in the year 1984, 109 garnishments were filed.
Unidentified Justice: Well, that makes a lot of sense.
All I am pointing out is you really just can't say it's simple language if it relates to.
You really don't mean that.
I mean a lot of things will relate to the fund in the sense of having an effect upon the fund, which you will acknowledge are okay.
Mr. Mathews: Yes.
But I would say is that those state laws would be preempted were it not for the doctrine that the--
Unidentified Justice: You can have fun but you can't die laughing.
That's the doctrine that applies.
Mr. Mathews: --No, the federal laws should not be impaired in their work.
And the doctrine in Shaw v. Delta Airlines case, that they are sort of revived when they are necessary to accomplish the ends of a federal statute.
One of the ends of ERISA is to have plans work, and so I would say it's a revival, but that 514 still would, without that concept of revival, would preempt them.
Unidentified Justice: Well, Mr. Mathews, there is a sue and be sued clause in ERISA, isn't there?
Mr. Mathews: Yes, there is.
Unidentified Justice: And this Court has said, based on other sue and be sued clauses in other circumstances, that that would include garnishment proceedings, hasn't it?
Mr. Mathews: I believe it has.
Unidentified Justice: So it certainly is conceivable that Congress intended that garnishment procedures be included within the scope of that sue and be sued provision as being all right.
Mr. Mathews: If we were looking for an implied intent of Congress, I might agree with Your Honor.
But Congress has told us what it meant.
It said all state laws relating to.
We don't have to delve for Congress's intent and do it by extrapolation that sue and be sued is part of functioning, or is expressly allowed.
Congress said if it relates to, and certainly--
Unidentified Justice: Well, of course, Congress did enact Section 206(d) dealing expressly with assignment or alienation of benefits for pension plans.
Mr. Mathews: --That is true, but 206(d) in its specific terms deals with the voluntary alienation of pension funds.
Unidentified Justice: Well, it deals across the board.
Mr. Mathews: Well, there has been a gloss on the statute by the courts that that would also cover involuntary alienation.
That is true.
But 206 says nothing about welfare plans.
Unidentified Justice: Well, in your view, 206(d) is at least partially superfluous since you think 514 would preempt anyway.
So why did Congress need to pass 206(d)?
Mr. Mathews: Well, historically speaking, they passed 206(d) before they passed 514.
At the time that 206(d) was drafted there was a much less pervasive preemption provision in the House and Senate drafts of ERISA than in the conference that come up with the 514 which got to the relation that relate to the standard.
So I think that would explain it to some extent.
Unidentified Justice: Do you think that garnishment law is generally treated as a matter of state procedure?
Mr. Mathews: I would have said that probably before I did the research in this case.
But doing the research, I think it's substantive law.
I think it creates rights and liabilities where none existed before.
That is, the right against the holder of the funds as opposed to against the judgment debtor, and I think that's substantive law.
So I wouldn't put it just in the matter of procedure.
There are a lot of procedures connected with it, and that's part of the problem that the fund faces is that you have got funds that have four different states involved, and they all have different procedures.
And Georgia has a particularly noxious procedure in that you have got to appear like a defendant, appear by attorney, file an answer, update it every 45 days if you haven't paid up everything, and really get involved with the legal process.
A state like New York, you simply file it on the garnishee and--
Unidentified Justice: I am not convinced, I think, that Congress was concerned in its preemption Section 514 with the workload burden on the trustees.
I know that's the thrust of your argument on behalf of the trustees, but I'm not sure Congress was really worried about that.
I think in the pension area they were worried about protecting the benefits and not letting the employee lose the benefit of the pension plan.
Now on vacation benefits, they seem to have less concern about protection of the employee.
But I don't find a lot of concern about the trustees and the work they have to do to meet state procedures.
Mr. Mathews: --Well, again, Your Honor, you are going to an implied preemption analysis in trying to psycho analyze Congress.
I am not just saying let's do what Congress said.
They said does it relate it, and I think that in the real world you cannot say it does not relate to when it makes the trustees pay out the benefits differently than the trust funds says, when it puts them to administrative burdens of appearing in court, when it puts them to a large expense, because in every one of these things they have got to hire a lawyer.
And I figure in the course of filing the updates and everything, that lawyer has to put in an hour's time in the course of a year.
So you are figuring about $100 per garnishment.
We have over 109 garnishments in one year alone.
That's money out of the fund.
And Congress itself has recognized in another connection, the Consumer Protection Act, that state garnishment laws do have an impact.
They have made it a crime with a $1,000 fine and a year in jail for an employer to fire somebody because his salary has been garnished.
Why do they do it?
The legislative history of that act tell us because it was such a burden on the employers that they would rather fire somebody than pay the garnishment.
In the same statute there is a finding that the state garnishment laws, the discrepancies and differences in them have made the uniform application of bankruptcy law impossible.
And uniformity, as we know, is another one of the congressional purposes in ERISA--
Unidentified Justice: I have to go back to Justice Scalia's questions if I may.
Supposing the fund doesn't have enough money to pay its rent.
They lease an office to operate the fund; it's a small fund.
Could they be sued in state court and invade the fund to pay the rent?
Mr. Mathews: --I think they could.
Unidentified Justice: Well, why is that different?
Mr. Mathews: Because that is necessary to the functioning of the fund or of anybody else who goes into business, and I think it's impliedly revived by Congress's intention that there be funds.
Unidentified Justice: But your language is still the same, and the garnishment... you rely entirely on 514, don't you?
Mr. Mathews: Yes, Your Honor, entirely.
I think 514 says what it says.
It's very clear what it says.
This Court has said what it means.
Does it have an effect on the plan?
It does have an effect on the plan and therefore it's preempted.
Unidentified Justice: What they seek to garnish in this case, these were vested; these were not contingent benefits.
These were vacation benefits.
Mr. Mathews: Well, they wouldn't get them until they were due and owing.
Unidentified Justice: But under the plan when would they have gotten it if they weren't garnished?
Mr. Mathews: In Georgia, it would be the end of the year.
So like December 31st they get all their holidays and all their vacation for the previous year if they have qualified for vacation and holiday benefits.
That's what I say about the 45-day renewal.
If they get served with a garnishment in January, every 45 days they have got to go up and say, we don't owe them anything yet until we get to December 31st.
And then they come in and they say, and now we owe it to them, and here's the money.
So it's an ongoing thing which plan has to refer to our office, and an attorney has to work on them.
Unidentified Justice: So suppose that you are right that this law does relate to garnishment, or does relate to the plan.
That's your position?
Mr. Mathews: Yes, sir.
Unidentified Justice: It's preempted, and therefore what?
Mr. Mathews: It's preempted.
It is null and void.
Unidentified Justice: So?
Mr. Mathews: ERISA plans may not be garnished under state garnishment procedures.
Now what happens is that when the money gets paid over to the--
Unidentified Justice: On what do you rely for that?
Mr. Mathews: --Well, the statute is null and void if it is preempted.
Unidentified Justice: All right.
The state law which exempts--
Mr. Mathews: No, I said the state law which permits garnishment is null and void, because it relates to the plans.
Unidentified Justice: --All right.
Mr. Mathews: And I would like to reserve the rest of my time for rebuttal if I might--
Chief Justice William H. Rehnquist: Thank you, Mr. Mathews.
We will hear now from you, Mr. Martin.
ORAL ARGUMENT BY BRIAN J. MARTIN, ESQ. AS AMICUS CURIAE, IN SUPPORT OF PETITIONERS
Mr. Martin: Thank you, Mr. Chief Justice, and may it please the Court:
We agree with Petitioner that ERISA, in general, preempts the application of state garnishment laws to employee benefit plans.
Our view is also based on 514.
But before I get to the 514 point, I'd like to respond to a couple of points of Justice O'Connor.
The sue and be sued clause in Section 502 seems to us to mean that a plan may be sued on any valid federal claim or non-preempted state claim.
It does not override the preemptive provision of 514, whatever that means.
And with respect to 206(d)(1), which provides that pension benefits may not be assigned or alienated, we do think there is a bit of overlap between 206 and 514.
But we think that to conclude it, this overlap makes much more sense in a complex ERISA statute that was built over the course of years than to conclude that 206, by addressing pension benefits and not welfare benefits, silently excluded garnishment of welfare benefits from 514.
Exclusions from 514 are in 514, 514(b) in particular.
Justice Scalia raises the obvious question, where does the line draw in 514.
We think that there are a number of ways to answer that question.
One rule of decision would be a state law that determines whether plan benefits will be paid to a plan participant is a law that relates to that plan.
I think this Court's decision in Shaw and in Metropolitan Life would support that view.
In those cases the state law required the payment of benefits in the cases of mental illness and pregnancy.
Another possible decision, rule of decision would be the state law that requires, or forbids the payment of benefits is preempted if, in addition, it imposes administrative duties on the trusties.
In this case we have those duties.
They have to answer a garnishment summons within 45 days.
They have to pay over the funds if they can calculate them to the court.
Unidentified Justice: Well, that's true any time you allow the trustees to be sued under state law.
They are going to have to hire a lawyer.
They are going to have to file an answer, that sort of thing.
But you are not saying that no legal action based on the state law can ever be brought against the trustees, are you?
Mr. Martin: No, no, I'm not saying that.
They can be sued for zoning violations if they have to house the--
Unidentified Justice: Well, unpaid rent, Justice Scalia's example.
Mr. Martin: --Unpaid rent, all of these.
I'm giving examples of where the line could be drawn.
One that determines whether benefits will be paid to a plan participant and imposes administrative tasks is one possible line.
But I think perhaps the narrowest and clearest line is where did Congress draw the line.
And we know from an amendment to ERISA in 1984, the Retirement Equity Act that added 514(b)(7), that Congress thought that garnishment laws sufficiently affect ERISA plans to be preempted.
Unidentified Justice: How about a state tax lien on the employee's benefits?
Mr. Martin: That would be preempted too under 514(b)(7) which the House Report accompanying the bill specifically endorsed the Ninth Circuit's decision in Franchise Tax Board which held that state tax levies could not be applied.
Unidentified Justice: Tell me again what is 514(b)(7) and where is it?
Mr. Martin: 514(b)(7) is an exclusion from the preemption language of 514(a).
It allows garnishment in the case of domestic relations orders.
Unidentified Justice: Like from pension plans.
Mr. Martin: From pension or welfare.
It codified the line of cases that had held that there was an implied exclusion from 514(a) for family domestic relation orders such as alimony and child support.
In 1984, Congress said, well, 514(a) may have swept that in there.
We don't want it swept in there, so we will amend the statute.
But in amending it, they made clear that other types of garnishments would continue to be preempted.
So, to me, perhaps the narrowest and most clearest way to decide the case is to look where Congress drew the line in this case.
We know that garnishment, but for domestic relation orders, sufficiently affects the plan to be preempted.
Unidentified Justice: That's nice for this case.
Mr. Martin: Yes.
Unidentified Justice: It won't help very many others, will it?
Mr. Martin: Probably not.
Unidentified Justice: There are likely to be a lot of these.
I mean there are a lot of those plans and they involve a lot of money, and we seem to be getting a fair amount of litigation involving this issue of what "related to" means which certainly is not self-evident.
Mr. Martin: Well, it's not self-evident.
Congress, unfortunately, left it to this Court to draw that line in various cases.
That is why I am suggesting that at the state level--
Unidentified Justice: What do you think would be a line of more general utility?
Mr. Martin: --A state law that determines whether the trustees will pay benefits to a plan participant pursuant to the plan is preempted, tied to the benefits and to the plan.
Unidentified Justice: Is the legislative history as clear as you describe it?
What you are relying on is what's quoted on Page 18 of your brief, isn't it?
Mr. Martin: Yes.
Unidentified Justice: "The committee emphasizes that except as expressly provided nothing in the bill is intended to limit or otherwise change the original broad intent behind ERISA's rule of preemption."
"That intention has always been to preempt state or local government laws or actions of any type which directly or indirectly relate to any employment benefit plan."
What does that tell us about garnishments?
Mr. Martin: The next sentence adds--
Unidentified Justice: That just repeats the language of the statute.
Mr. Martin: --The next sentence of the House Report,
"Thus, for example, the committee reasserts that a state tax levy on employee welfare benefit plans is preempted by ERISA."
citing the Ninth Circuit's decision in Franchise Tax Board.
In the Senate Report, which unfortunately I don't believe is cited or quoted in our brief, at Page 19 of the Senate Report, the Senate Finance Committee says that,
"Only those orders that qualify as domestic relation orders are not preempted by ERISA."
So I do think that in other provisions of the committee reports make it clear that but for garnishment of domestic relation orders, alimony, child support, garnishment laws would be preempted.
If there are no other questions, the judgment should be reversed.
Chief Justice William H. Rehnquist: Thank you, Mr. Martin.
We will hear now from you, Ms. Mahoney.
ORAL ARGUMENT BY MAUREEN E. MAHONEY, ESQ. AS AMICUS CURIAE IN SUPPORT OF JUDGMENT BELOW
Ms Mahoney: Mr. Chief Justice, and may it please the Court:
The Solicitor General and the Petitioners are searching for a line on how to interpret Section 514's relate to language.
There is no question it's a difficult task.
But in all of the other cases, with the exception of Franchise Tax Board in which this Court has considered the preemptive scope of Section 514, it was dealing with actions which were brought by trustees or beneficiaries.
Trustees and beneficiaries are provided specific remedies under Section 502 of the Act.
And the Court has found that when you are dealing with claims by beneficiaries and by trustees within the core of the Act, that all state law, all state substantive law and even the causes of action are preempted because those are within the core of ERISA.
The only case where this Court has considered the scope of preemption in an action brought by a party not covered by Section 502, such as a creditor of the fund or as in this case, a creditor who seeks garnishment against a beneficiary, was Franchise Tax Board.
And in that case this Court specifically drew the line by saying that ERISA was not intended to preempt all causes of action by third parties against a fund.
It doesn't speak to the question of what a third party's remedies against the fund may be.
Instead, it says that the causes of action themselves are preserved, but the substantive law that will be applied to the right to recover has to be consistent with federal law under ERISA.
So, in effect, in Franchise Tax Board, the Court drew a line and said the action to enforce the tax levy, which was brought by the state, was not in and of itself preempted, but the question of whether or not the trustee could comply with that remedy had to be answered under federal substantive law.
So, in effect, this Court has said that while a conflicts analysis for preemption isn't required in a case which is brought by an beneficiary or by a trustee within the realm of rights covered under Section 502, it is required when it is an action which is brought by a third party against a fund for remedies which are collateral to the substantive purposes of ERISA.
Unidentified Justice: Ms. Mahoney, was the Franchise Tax Board decision to which you refer, was that decision of our Court or of the Ninth Circuit?
Ms Mahoney: That was a decision of your Court, Your Honor.
Unidentified Justice: Of our Court.
Ms Mahoney: In that, it was a case involving the question of whether or not an action which was brought by the State of California to enforce its tax levy could be removed to federal court as a federal question.
And in looking at that question, this Court had to decide whether or not ERISA preempted that cause of action in its entirety such that it couldn't proceed in state court.
And the Court very explicitly said, we don't answer the question of whether or not ERISA precludes garnishment.
That's a question that has got to be answered under the substantive law of ERISA.
In other words, the question of whether or not the trustee should comply with a writ of garnishment is one which has to be answered under common law principles developed by this Court pursuant to ERISA.
So it seems to me that the question in this case is whether or not the garnishment action that has been brought by the Respondent in this case conflicts with the substantive law of ERISA.
And essentially the Petitioners in the United States maintain that it conflicts in two respects.
First, they say it conflicts because ERISA was intended to prevent any creditor from ever asserting a claim for garnishment against the fund, or ever attempting to alienate the benefits in favor of creditors; that that was a substantive protection which ERISA was intended to provide which would be destroyed.
Second, they maintain that ERISA was intended to prevent the fund itself from having to endure the burdens of garnishment.
With respect to both of these issues, I think the answer is that there simply is no such federal purpose under ERISA.
And that if we look at each of these questions separately, it becomes apparent why.
First, on the question of whether or not Congress intended to protect beneficiaries in all welfare plans from involuntarily alienation of benefits, we look first to what ERISA says on this subject.
Under Section 206(d), Congress very explicitly provided that pension benefits cannot be alienated, can't be alienated in an involuntary or a voluntary fashion.
And when it did that, it was acting against the backdrop of the common law, and I think it's important to understand how you protected benefits, or wages, or property from creditors at common law in order to understand the significance of what Congress did.
Essentially at common law any property in the hands of a third party could be alienated in favor of creditors unless it had been donated, placed in the trust and the trust had a spendthrift clause.
So when Congress came to this problem for pension benefits, it went ahead and it required that pension... promises to pay pension benefits have to be funded, they have to be placed in a trust, and they have to have a spendthrift clause.
Unidentified Justice: Well, Ms. Mahoney, Congress also, though, enacted Section 514, and that's what obviously the government and the Petitioner are relying on.
And in the process, Congress also, in 514(b)(7), exempted domestic relations orders from the preemptive effect of 514(a).
Now why would it have done that if it didn't think it had prevented in 514(a) the garnishment pursuant to a child support order, for example?
Ms Mahoney: Your Honor, the domestic relations order I believe was done for a very different purpose.
It wasn't directed at garnishment per se.
It was directed at the substantive law question.
In other words, what the exception to 514 for domestic relations order does, because it says that the substantive law of whether or not a wife is entitled to support will be determined under the state law of domestic relations order.
Unidentified Justice: Well, aren't most of these domestic relations orders from an errant parent collected by a garnishment order if there are some funds to do it?
Ms Mahoney: Your Honor, it could be--
Unidentified Justice: And isn't that legitimately a concern of Congress in exempting it?
Ms Mahoney: --Yes, it is, except that the domestic relations exception does something much broader than garnishment itself.
It actually provides that the plan... that the issue of rights to benefits is to be decided under state domestic relations law, not under federal law, and--
Unidentified Justice: But it may also affect the garnishment.
Ms Mahoney: --It certainly may affect the garnishment.
But I think that you... that the exception is necessary only to the extent that it affects the substantive law.
And that in this case, no exception to, or no exemption from 514 is necessary, because federal substantive law does have to govern the question of whether or not the trustee is obligated to comply with the garnishment order.
I think that is the critical difference, and that's why the exception for domestic relations orders shouldn't be read to just mean that any garnishment has to be approved by a specific exemption to the section, because it did much more than approve garnishment orders.
In fact, it's not even clear that garnishment orders itself are within the specific definition of domestic relations orders.
Unidentified Justice: Let me ask you, since you are interrupted, about this particular Georgia law.
It seems to me that under the terms of the Georgia law, even if we agreed with you on the scope of 514, we would still have to reverse because the Georgia Supreme Court was certainly... it took a very odd view of the effect of the Georgia law, didn't it?
Ms Mahoney: You are referring to the section which exempts ERISA plans from garnishment?
I think that the section which exempts ERISA plans from garnishment has to be preempted by Section 514.
And the Georgia Supreme Court was correct in that, because that section, its only purpose is to regulate ERISA plans.
In effect, what the exemption does is it says trusts in the State of Georgia have valid spendthrift clauses whenever they are created for an ERISA plan beneficiary.
That will create the precise disuniformity which Congress intended the preemption clause to establish.
If Georgia is permitted to say that in our state spendthrift clauses are in force, then there will not be a uniform substantive law governing trust administration throughout the United States, and that's why this Court in Franchise Tax Board said that the question has to be answered under the federal common law developed under ERISA and cannot be answered under state law.
And also, Your Honor, to the extent that that section is preempted, the rest of the garnishment laws remain in tact, and the remedy can proceed.
Unidentified Justice: Do you happen to know if prior to the enactment of ERISA going back in the early days in Georgia, and prior to the enactment of the particular statute that you just say is preempted, the one relating to ERISA, would the garnishment been appropriate in Georgia of a, just say there was a state-administered plan like this?
Ms Mahoney: Your Honor, I don't now of a specific case, but I believe that the general principles of garnishment that were applicable in Georgia would have permitted this garnishment because there was no general exception for benefits of any type.
In fact, there is no exception for vacation benefits that are not in an ERISA fund under the Georgia law.
So there is no indication that Georgia, independent of ERISA, would have wanted to protect these particular kinds of benefits.
Unidentified Justice: Do you happen to know if there is any reported cases in Georgia of garnishments of these funds, you know, just normal state trusts?
Ms Mahoney: I know of no such case.
Unidentified Justice: It sounds strange to me.
I was just thinking back in my own practice.
I don't remember garnishing trust funds like this even before ERISA was enacted.
Ms Mahoney: Well, one of the things that I think is important to keep in mind here is that the specific funds are vacation funds.
And ordinarily garnishment of vacation funds occurs just in the ordinary course of wage garnishment, because the vast majority of American workers are paid vacation pay through their regular wage distributions.
And, in fact, the Department of Labor has found that vacation pay shouldn't even be subject to ERISA except to the extent it's placed in a trust fund, because Congress didn't have any substantive intent to protect vacation pay.
And what that really says here is that Congress must not have intended to prevent the alienation of vacation pay in favor of creditors.
Otherwise, all vacation pay should be subject to ERISA.
Nor can it be said that there is a good reason to find that vacation pay should be protected from alienation simply because it's been put in an ERISA fund.
Unidentified Justice: Well, you get two kinds of vacation pay.
Some just pay the regular salary when an employee is on vacation and that, of course, would be subject to garnishment if he just got his salary.
But if you put it in a fund, it's not payable until the employee accrues the amount that would be distributed when he gets his vacation, he or she gets his vacation.
Ms Mahoney: Your Honor, it cannot be garnished until that point in time either.
Unidentified Justice: Well, of course not, because there is no vested interest in it until--
Ms Mahoney: That's right.
So, in other words, the garnishment works precisely the same way.
Under the Georgia law, the creditor is not entitled to obtain that vacation pay until the date in which it in fact can be paid to the employee.
Unidentified Justice: --Right.
Ms Mahoney: And when it garnishes wages, it's not entitled to the wages until the date on which it is payable to the employee.
Unidentified Justice: Right.
Ms Mahoney: So they are really indistinguishable.
In fact, it's just happenstance that vacation pay is in a trust fund in this case.
It only occurs really because these are... it is an industry where they have multiple employers during the year, and therefore the only way to provide vacation benefits is through a trust fund of this type.
But it is very difficult to look at the issue of vacation pay and to say that Congress had an affirmative intent to make sure that vacation benefits would not be subject to claims of creditors.
In fact, it's the Department of Labor's position on vacation pay by adopting a regulation which takes vacation pay outside of the scope of ERISA is the best evidence of the fact that Congress didn't intend to provide this kind of substantive protection to vacation pay.
Unidentified Justice: Ms. Mahoney, the government has given us its best shot at a general rule to determine what "relating to" means.
What is yours?
What is the general rule that includes this case and also helps us in future cases?
Ms Mahoney: I think the general rule has got to be that, first of all, state procedures are not laws that relate to ERISA plans even though they might burden ERISA plans, except to the extent they are in conflict with the substantive requirements of ERISA.
And I say that because if you look to the statute, it seems very clear that Congress did not intend to preempt state procedures.
Congress preserved concurrent jurisdiction.
It provided certain procedural requirements for cases brought in federal court which it did not impose on the state courts hearing the same actions such as service of process and venue.
And with respect to the kind of procedure that's in issue here, procedures in aid of execution of judgments, there simply are no federal procedures in aid of execution of judgments.
Unidentified Justice: Well, it seems to me this is a procedure if you look at it from the standpoint of the creditor, or from the standpoint of the debtor, but I don't know that from the standpoint of the garnishee getting an order from the court is a procedure.
It's no different from a tax assessment, it seems to me.
Ms Mahoney: Well, I think, Your Honor, it's more like a subpoena.
It's been defined as a procedure under Rule 69.
It is a writ, that's what it is.
It has been defined as a procured under the Consumer Credit Protection Act which governs garnishment, and even in the Rules Enabling Act that gives this Court the power to adopt federal rules, it says Rules of Procedure include writs.
So I do think that it is a procedure.
It's much like a subpoena.
When the trust fund obtains a subpoena to come and testify and bring records, it is very, very burdensome, and nobody likes getting them, but certain... and it certainly burdens the plan in much the same way that the garnishment writ burdens the plan.
But I don't think that 514 was meant to totally displace all of the judicial remedies which are used in both state and federal courts.
And essentially I don't think... it doesn't serve to adjudicate liability.
It only serves to take liability which is already established.
Unidentified Justice: What about an order and execution of judgment; is that a procedure?
Ms Mahoney: Yes, it is, Your Honor.
Unidentified Justice: So any state judgment--
Ms Mahoney: The judgment itself.
Unidentified Justice: --So long as you can get a judgment in state court, you can execute it against the ERISA trust.
Ms Mahoney: I think that's correct except to the extent that it would contravene the substantive provisions of ERISA.
I mean that's what Franchise Tax Board does very explicitly, and says that you have to look to see whether or not a third-party remedy would be inconsistent with the substantive law governing ERISA.
And I think that's where the line has got to be.
If it conflicts with the purposes of ERISA, if ERISA, for instance, was intended to preclude alienation, then certainly it is preemptive.
But unless ERISA in fact intends to preclude alienation, or intends to prevents burdens on plans, plans themselves, then I do not think that it can be preempted.
There has to be a conflict with the substantive law of ERISA before--
Unidentified Justice: So you say then that even if ERISA would provide that you can't get a hold of these vacation benefits, nonetheless, the garnishment process would be in force?
Ms Mahoney: --No, Your Honor.
Well, the procedure would be in force, but there would be no right to recover.
In other words, if someone--
Unidentified Justice: Yes, but that would mean the trustee would have to answer not that you can never garnish the trust, but that there is no liability on the trust in this case.
We hold nothing that you can get by garnishment process.
Ms Mahoney: --That's correct.
There would be no liability.
Sure, he would have to respond, because I just don't think 514 can be viewed as something which simply displaces all of the incidents of the judicial process, and garnishment summons... the answer would be, we're not liable because... or we don't have to turn this over to you because Congress said that it would be inappropriate to do so, and that is a perfectly valid answer which would have to preempt any state answer to the country.
Unidentified Justice: But, counsel, I have trouble with this word "procedure".
That when you take all of my money, that is the procedure.
Ms Mahoney: Your Honor.
Unidentified Justice: I guess you call execution a procedure.
Ms Mahoney: Yes, Your Honor, I would.
Unidentified Justice: That's a procedure?
Ms Mahoney: Yes, it is.
Under Rule... you're talking about execution of judgments, I assume.
Unidentified Justice: I said executions.
Ms Mahoney: Oh, I'm sorry, Your Honor.
I don't think that's provided for under Rule 69.
Whether you call garnishment a procedure, which Rule 69 does call it, or whether you say that it in fact is a creditor's remedy, the answer should be the same.
Unidentified Justice: Well, do you see a difference between the procedure of asking you to testify and the procedure of taking your money away from you?
Do you think they are both procedures, right?
Ms Mahoney: Your Honor, in this case I do, because--
Unidentified Justice: They are a little different, though, aren't they?
Ms Mahoney: --Yes, they are different.
They are asking for something different.
But when they ask for the money, they are not attempting to adjudicate liability on the part of the fund.
We're talking about a liability which is established, a liability that is due not to the garnishee but rather, to the beneficiary.
And the only... the significance of the writ of garnishment is it says instead of paying over the money you owe to the beneficiary, you pay 25 percent of it, in the case of wages, over to us.
It's very similar to... it's equivalent--
Unidentified Justice: You mean as to the person with the money, it's just a procedure.
Ms Mahoney: --To the person with the money, it is a procedure, yes.
The trust doesn't dispute that the monies are owed to the beneficiary, and it discharges their liability to the beneficiary.
They just claim that it's burdensome to have to do it just as it is burdensome... I mean their complaint is not about having to give the money.
It's about the fact that they have to go through the burdens attendant to garnishment, and that's an argument that's been rejected by this Court before.
In FHA v. Burr, the federal agency said we can't be subject to garnishment for our employees' wages because it's too burdensome.
It requires us to process these claims, and the Court said, no, that is an important part of the judicial process unless Congress expressly says you are relieved from that burden.
Unidentified Justice: Well, that didn't involve an ERISA plan though.
Ms Mahoney: No, Your Honor, it didn't.
Unidentified Justice: So I think that... unless you are dealing with Section 514, that probably isn't a good precedent.
Ms Mahoney: Well, the reason that I think it is a good precedent is because it says that garnishment is viewed as a normal incident of the judicial process.
And unless you are immune from suit, or unless Congress expressly says you are not subject to garnishment, you are.
And I think that when you look at 514, it really can't be construed as an expressed direction that no garnishment can be permitted, and that's why I think that the case in fact is very much on point.
Why is it that the trust funds are exempt from garnishment?
Is it because it's simply a burdensome procedure?
Well, if so, then why aren't they also exempt for a subpoena directing them to produce all their records and come and testify?
Unidentified Justice: Well, I think the Solicitor General doesn't point so much to that as it does a protection of the benefits themselves.
Ms Mahoney: Okay, that is a very different question.
To the extent that Congress intended to protect the benefits from alienation, there is no question that the substantive federal law has to govern.
I do not think, though, that ERISA reflects an intent to protect the beneficiaries from alienation of vacation benefits.
Congress knew how to protect benefits.
They knew that they needed to put them in a trust fund, and they needed to have a spendthrift clause.
That's what they did for pension plans.
But they didn't do it for welfare benefits.
They didn't require them to be funded.
Unidentified Justice: Well, they may have done more in 514 with their "relate to" language.
That's what this turns on, doesn't it?
What does "relate to" mean?
Ms Mahoney: Yes, Your Honor, except that I don't believe that the "relate to" language should be construed to apply to a third-party action when Congress didn't even address the question of what remedies would be available to third parties.
I don't think that this is really any different than let's say a cause of action by an accountant for breach of contract against the fund.
That would require the fund to pay out monies that otherwise could be paid to beneficiaries if they were held liable, and there is no federal creation of a cause of action for such creditors.
Nevertheless, it would relate to the fund in the same way that garnishment relates to the fund.
But I can't believe that Congress intended to preempt all third-party actions, and that really was the essence of the holding in Franchise Tax Board.
Was that for those remedies that Congress doesn't speak to, remedies by parties other than trustees and beneficiaries, they are preserved except to the extent they are inconsistent with the federal substantive law under ERISA.
And so we are back to the question, the key question in this case of whether or not Congress intended to prevent the alienation of vacation benefits.
Unidentified Justice: May I just clarify one.
I think I know the answer, but I want to be sure.
You do agree, do you not, that if this were a pension plan, you could not garnish the--
Ms Mahoney: That's correct, Your Honor.
Unidentified Justice: --And you emphasized the fact that welfare plans and pension plans are treated differently under the statute.
Ms Mahoney: That's correct.
Unidentified Justice: But then in Franchise Tax Board, it was a welfare plan, wasn't it?
Ms Mahoney: Yes, it was, Your Honor.
Unidentified Justice: Then how to you explain that case?
Ms Mahoney: Well, Franchise Tax Board I think is critical to the analysis here, because in Franchise Tax Board the state brought an action to collect on its tax levy in state court.
They did it under a state cause of action.
The trustees of the plan that were sued removed the case to federal court, and the question which was ultimately decided by this Court was whether or not the removal was proper.
And they found that they had to answer two questions in determining whether or not the removal was proper.
The first was whether or not that cause of action raised a federal question on its face.
And the answer given was it does present a federal question.
The federal question is whether or not the trustees are obligated to comply with the levy.
But that is raised by way of defense.
Therefore, it's not removable under the well pleaded complaint rule.
But the looked to a second question, and that was whether or not it was removable because the cause of action itself was preempted in its entirety by ERISA.
And the Court said it was not.
This Court said that ERISA does not speak to the question... in fact, it says that ERISA neither creates nor expressly denies any cause of action in favor of state governments to enforce tax levies or for any other purpose.
It doesn't purport to reach every question relating to plans covered under ERISA.
And it found that the action to enforce a levy is not itself preempted.
Unidentified Justice: But then, as I remember the legislative history the government cites on (b)(7), refers to the Ninth Circuit decision in Franchise Tax Board.
Ms Mahoney: That's correct.
Unidentified Justice: Now was that before our decision?
What's the timing on that, or do we--
Ms Mahoney: Your Honor, I believe--
Unidentified Justice: --See, that seems inconsistent with your position, or am I missing something?
Ms Mahoney: --No, I think you are correct.
I think it is inconsistent with the position.
I don't have a reason to say that it is different.
The only thing I could say is that when Congress looked at the Franchise Tax Board opinion, that opinion didn't consider whether or not the substantive law of ERISA could be used to prevent garnishments which were inconsistent with the purposes of ERISA.
And it may well be that if Congress had understood the issue in that fashion, they wouldn't have found that garnishment should be precluded, because they may have been concerned that garnishments could occur even where plan benefits should not be subject to alienation.
Unidentified Justice: Before the (b)(7) amendment, had the courts been allowing... in alimony and child support cases, had they been allowing collections from pension trusts as well as welfare trusts?
Ms Mahoney: Yes, they had, Your Honor.
Unidentified Justice: They had.
Ms Mahoney: They had been allowing them.
Unidentified Justice: Which was really inconsistent with... normally thought to be inconsistent with that spendthrift--
Ms Mahoney: Yes, but they found an implied exception essentially.
Unidentified Justice: --Yes.
Ms Mahoney: I don't think that those cases are particularly germane to the issue of whether or not non-domestic relations orders can be enforced against a plan or not though.
Unidentified Justice: Can you refresh my recollection on one other thing?
Why isn't the Respondent defending the case itself?
Why were you appointed?
This isn't a moot case is what I wanted to be sure--
Ms Mahoney: No, Your Honor, it's not a moot case.
They still very much would like to have the monies collected, but they simply didn't want to invest anymore monies in the case.
Unidentified Justice: --I see.
I take it you are defending the judgment below and also the rationale?
Ms Mahoney: Your Honor, yes, that is correct.
Unidentified Justice: You defend every step in that.
Well, that's quite wrong.
You said you thought the statute was preempted, the Georgia statute that they construed.
Ms Mahoney: The section of the Georgia statute which purports to provide--
Unidentified Justice: You say you don't rely on that statute.
You rely on the general garnishment statute.
Ms Mahoney: --That's correct, but that--
Unidentified Justice: So that's a very different argument than the Georgia court made.
Ms Mahoney: --Well, the Georgia court simply said that that section of the Georgia law which purports to provide an exemption from garnishment is preempted, and it didn't go into detail in looking at what else there was, but they affirmed the order of garnishment, so they presumably found that the rest of the statute remained in tact, and I think that that is the analysis.
Unidentified Justice: The Georgia court did say that this state was preempted.
Ms Mahoney: They said that the section--
Unidentified Justice: Yes.
Ms Mahoney: --Yes, Your Honor, they did.
Unidentified Justice: But then it went on and did what?
Ms Mahoney: It went on and upheld the garnishment orders--
Unidentified Justice: Because?
Ms Mahoney: --because the rest of the statute was not preempted and the garnishment was consistent with ERISA.
Unidentified Justice: I thought they thought that ERISA affirmatively permitted garnishment.
Ms Mahoney: They did.
In other words, they found that--
Unidentified Justice: Sort of a negative inference from--
Ms Mahoney: --Yes, the inference which I think--
Unidentified Justice: --And you defend that?
Ms Mahoney: --Oh, absolutely; oh, absolutely.
I think that ERISA very much intended to permit creditors' remedies against welfare plans, particularly in the case of benefits such as vacation pay.
Unidentified Justice: Well, if that's so, that's all the court below needed to say.
If the ERISA affirmatively intended to permit garnishment, a state should not be able to except it.
Ms Mahoney: That's correct.
I believe that is what the Georgia Supreme Court said.
Unidentified Justice: Well, they didn't even need to mention 514 then.
Ms Mahoney: Well, I think they mention 514 in that that is the expressed preemption clause.
So to that extent, but you are right, it would be preempted even if there were not an--
Unidentified Justice: Yes.
Ms Mahoney: --expressed preemption clause.
But on the question of whether or not... I really think that the key question here is whether or not there is, under this Court's power, to create common law of trusts, whether or not there is a policy reason in favor of preventing the alienation of vacation benefits held in a fund.
Chief Justice William H. Rehnquist: Thank you, Ms. Mahoney.
Mr. Mathews, you have six minutes remaining.
Mr. Mathews: Your Honor, obviously Ms. Mahoney and I are in sharp disagreement, but I think the lines are well drawn, and I don't think I have to take any more time of this Court.
Chief Justice William H. Rehnquist: Thank you, Mr. Mathews.
The case is submitted.